Health Care Reform can be divided into three main tenets: The Individual Mandate, Exchanges, and Pay-or-Play. A brief overview of each of these components follows.
Individual Mandate.
Starting this year, all individuals must obtain essential health coverage or pay a penalty on their tax returns. Coverage must meet health care reform requirements and be considered "minimum essential coverage."
The annual penalty for not maintaining minimum essential coverage in 2014 is small: $95 per individual or 1% of income. In future years, the annual penalty tax increases. In 2016, the penalty is $695 or 2.5% of income.
Exchanges.
The Exchanges are marketplaces for individuals to shop for coverage that provides minimum essential health benefits. Exchanges will be offered in all 50 states starting this year. The price for coverage offered through an Exchange varies based on state and based on the level of plan selected, along with different copay and deductible levels. Exchange coverage is not mere "catastrophic" coverage. Instead, it is full coverage that meets health care reform requirements. Copay and deductible differences cause prices to vary.
Pay or Play.
Large employers must make affordable coverage available to their full time employees or pay a penalty. A large employer for purposes of the pay or play mandate is an employer with 50 or more full time equivalent employees.
A large employer may be subject to two separate penalties: (1) a $2,000 penalty for not offering coverage to full time employees, and (2) a $3,000 penalty if an employee's coverage is not affordable and an employee purchases subsidized coverage through an Exchange.
Employers will want to familiarize themselves with each of the three health care reform components to avoid penalties and to make sure employees have the coverage required under health care reform.
